Tuesday, December 1, 2009

Government to Sell Off Student Loan Book: What does that mean for us?

Government to Sell Off Student Loan Book: What does that mean for us?

Gordon Brown marked the first day of the new political session by announcing a fire-sale of Government assets including the student loan book, a move that has led some to question the merits of the Government’s recession-beating plan.
The announcement, which will see roughly £3bn worth of Government-held assets sold to private investors, means that the student loan book will become the responsibility of a private company that will then become accountable for the collection of all outstanding student loans. Future loans will continue to be administered by the Government.
This is not the first time that such an idea has been in the pipeline. Between 1997 and 1999, Gordon Brown sold £4bn worth of student loans in an attempt to reduce the mountain of public debt. The idea was also mooted in 2007, but was rejected as being a bad deal for the taxpayer. It seems pertinent to question why conditions are deemed to be more favourable now, at a time when selling prices are much lower than in a buoyant market.
The basic theory behind the sale of the student loan book is that it will raise money in the short term, with a quick sale providing money for the taxpayer. It is painfully obvious that something has to be done as the treasury needs a fresh injection of funds to help combat the public debt; however, this particular plan is flawed. Any potential buyer would pay the government less than the full value of the loans (it has been estimated that they will be sold at around 95% of their value) meaning that the Government would lose out in the long run and that any private company would profit from the interest gained from loan repayments. Put simply, students would pay the same amount of money as before, but a portion of this money would line the pockets of a private company rather than being put back into Government and being used for common benefit.
Interestingly, Labour is not the only party that supports this move. The Conservatives have stated that the move was “probably necessary”, though a spokesman emphasised that this would only work if a raft of spending cuts were also implemented. The Liberal Democrats are the only mainstream party that oppose the stripping of Government assets under the present conditions. Spokesman Vince Cable warned that “this is not a good time to sell assets” and commented that “the Government have a terrible record with the history of gold sales and the sale of QinetiQ. There is now a proposal to sell land in a market in which development land is at about 15 to 20% of its peak value. Is that not an absolute guarantee that the Government will not get value for money?”
The Chief Secretary to the Treasury, Liam Byrne, outlined a plan to raise £3bn from assets within the next two financial years. This seems to contradict the 2007 valuation of the student loan book, which at £6bn was considered twice as much as is expected to be received for the whole package of assets in today’s markets.
The main issue will be the timing of any sale, for the time frame of the asset stripping will prove to be vital if the Government wish to receive fair compensation for the sales. While they cannot afford to wait too long to sell (though all of the assets mentioned have been touted before as items for sale, with little result) they would be foolish to sell at the bottom of the market, when prices are at their lowest.
This has not stopped them before and unfortunately is unlikely to stop them now. But the question still remains: why are we selling anything at the moment if it’s not going to be worth it?

Monish

 check out these links for more

Student Loan Consolidation - Tips for student loan consolidation | Student ..

PrivateStudentLoanConsolidation « Student Loan Consolidation Private

Direct Consolidation Loan - Know The Types Of Repayment Plans «  All ..

Student Loan Debt Consolidation - A New Stress Free Start | Best Loans

Comprehending the Basics of College Loan Consolidation | RimborsoLicenza.Or..

The Low Down On The Potential To Consolidate Private Student Loan | Debt Co..

Student Loan Consolidation Information – What is subsidized and unsub..

How Do I Get A Consolidation Loan? | Credit

Fight the Financial deed With Student Loan Consolidation | Simpositi.com

A Review On Getting The Best Student Loan Consolidation  :Student Loans

Student Loans for College – A grant or award | Finances Blog | skapis..

I would like to change my student loan from sallie mae to another company. ..

How Does Student Loan Consolidation Work? | Finance, Loan, Debt and Credit.

What incomes can you use when applying for a car loan? | Loan Tags | Consol..

All about Business & Finance » Finding The Best Student Loan Cons..

Overview Of Student Loan Consolidation Interest Rates | revistaminimi.com

Federal Student Consolidation Loans

How to Determine if Student Loan Consolidation Companies Are in Your Best I..

Student Loans With Bad Credit – There Are Options To Help - College S..

Student Loan Consolidation Most Popular Search. | Stuffhound

College graduate's loan debt climbs to record levels

College graduate's loan debt climbs to record levels

Jessica Hiddleson never thought she'd be on food stamps after graduating from college.

But with $18,000 in student loan debt and a part-time minimum wage job, the 22-year-old needed the help. She deferred her loan payments, but she still can't afford her rent in Ashland, so she's moving home to Albany and her parents next month.

Hiddleson and other new college graduates are getting a tough reality check as they hit the toughest job market in decades while saddled with record loan debt.

A national report released Tuesday shows just how hard it is for them: More than 60 percent of Oregon's 2008 graduates in public and private colleges took loans averaging $21,029. That is the 22nd highest debt rate in the nation, and just slightly lower than the national average – a record high of $23,200.

Aggravating the problem is their difficulty in finding jobs that enable them to pay off their loans. National unemployment rates  for college graduates ages 20 to 24 rose from 7.6 percent in 2008 to 10.6 percent this year, according to the report by The Project on Student Debt, part of the Berkeley-based Institute for College Access & Success.

"It's pretty rough," said Hiddleson, who graduated from Southern Oregon University in June. "I'm pretty much taking whatever jobs I can get, and I'm thankful for them."

Oregon doubled the funding for state grants for college students in 2008-09 with the intent of lowering the student debt load for graduates. Since then, state funding has fallen and record numbers of students have applied for aid, causing the state to turn down some eligible students and reduce grants to others.

At the same time, tuition has gone up significantly. Many campuses have increased financial aid to ease the impact on low-income students.

At Oregon State University and the University of Oregon, new financial aid programs cover the full price of tuition and fees for low-income students. Those programs might help lower the average debt loads at those schools in the future, financial aid officials at both schools said.

More than 800 UO students and 3,000 OSU students are in the programs this year.

"Even if tuition does go up, our neediest students will not feel like their loan indebtedness will be a hurdle for them," said Elizabeth Bickford, UO's director of student financial aid and scholarships.

Her counterpart at OSU, Doug Severs, said he recommends students look carefully at their expected earnings after graduation and monthly loan payments before taking out student loans.

Still, over a lifetime, they will earn more with a college degree than without one.

"I haven't seen a student who said, 'I'm not going to go to college because of this level of debt,'" he said.

Aaron Powell, a junior at Portland State University, did everything he could to keep his college costs down: He delayed college to join the U.S. Army and get GI Bill benefits; he started at a community college where tuition is lower, and he now works part-time.

But Powell, 27, still expects to graduate owing $20,000 in student loans, a debt load that might prevent him from going to law school.

"It really comes down to dollars and cents," he said. "Am I going to have enough money to finish my four-year degree and go on to law school?"

He also has about $22,000 in personal debt and he's considering filing for bankruptcy.

"I'm already in the red now," he said. "If they increase (tuition), I'm done."

Reed College reported the state's lowest debt load, $17,296, and the highest tuition, $36,420, in 2008.

Reed limits loans because "it's certainly more attractive to look at Ph.D programs when you're $17,000 in debt than when you're $40,000 in debt," said spokesman Kevin Myers. "That's a big mountain"

Reed plans to spend $18.5 million on financial aid this school year, up from $12.9 million five years ago.

Graduates of Southern Oregon University in Ashland had the highest reported debt load in the public university system in 2008, despite having the lowest tuition that year, according to the report.

SOU's spokesman, Jim Beaver, said he suspects the reported $26,000 average debt load is not accurate, but he could not reach financial aid officials Tuesday to check it.

Hiddleson put off law school or graduate school to give herself time to work and pay off some of her undergraduate loans. But she can't do that with a part-time job  that pays $8.40 an hour, the state's minimum wage, as an arts and crafts coordinator for an after-school program.

She applied to join the Peace Corps, which would allow her to defer her loans again and cancel some of what she owes.

"I wanted to do service for two years and think about what to do for the rest of my life," she said.

Hope this can be solved at a very short period.